Worcester trying to sell building with troubled past

Saturday

Mar 9, 2013 at 8:00 AMMar 9, 2013 at 12:59 PM

By Nick Kotsopoulos, TELEGRAM & GAZETTE STAFF

WORCESTER — The city will be issuing a request-for-proposals for the sale of a May Street apartment building it now owns and was the site of a controversial affordable housing project that was never completed.

Timothy J. McGourthy, the city's chief development officer, said the city will issue the RFP by next month and select a preferred developer by the end of May.

He said the RFP has been streamlined to ensure that it might attract broad interest. It will be advertised in both local and regional venues in an attempt to cast a bigger net.

The city will host walk-throughs of the property on April 1 and April 15 for those parties that might be interested in responding to the RFP.

The four-story, 13-unit building at 5 May St. was acquired by the city at public auction last month. The purchase price was $200,000.

City officials decided to buy the property after bidding on the property stalled at $135,000. That bid was made by Russell Haims, a property owner and developer who has been tied into many other neighborhood projects.

The 5 May St. property is assessed at $764,000.

The city forced the sale of the property after claiming that the previous developer, 5 May St. LLC, failed to meet its obligation to provide 13 units of affordable housing in 2011, as it originally contracted with the city to do.

Through the public auction process, the city hoped to recoup some of the money it has to repay the U.S. Department of Housing and Urban Development and the state Department of Housing and Community Development to address ineligible expenditures associated with the rehabilitation of the apartment building at 5 May St.

More than $2.3 million in public funds had been spent on rehabilitating the building, but it was later discovered that some of the money was used for ineligible purposes, prompting the federal and state governments to seek repayment from the city of that money.

The draft RFP for the property indicates that roughly 40 percent of the exterior and interior renovation work has been completed.

The building, which was constructed in 1920, has nearly 15,000 square feet of living space and a gross area of more than 19,300 square feet. Meanwhile, the size of the parcel the building is situated on is 6,090 square feet.

Those responding to the RFP will be required to describe their intended reuse of the property.

If it is for housing, they will be required to stipulate the number of units the new construction will produce, the approximate size and floor plan of each unit, the number of bedrooms in each unit and the proposed sale prices or rents for each unit.

Also, they will be required to indicate the number and/or percentage of the total units that will be affordable, as restricted by deed or affordable housing covenant.

Proposals are also required to provide scheduling timetables for the purchase, assembling of construction financing commitments, redevelopment of the site and expected occupancy of the property.

The disposition of the property will take place within 90 days after the execution of the Terms of Conveyance, and completion of the proposed reuse must be done within 18 months after that.

The 5 May St. project drew much scrutiny from several members of the City Council who complained that too much public money was going into a private project.

The property was owned by 5 May Street LLC, an affiliate of Levin Development LLC. It acquired the property in February 2010 for $435,000, according to city assessors' records.

Later that same year, the city executed its original funding contract with 5 May Street LLC. It was for $1.94 million and consisted of funding from the following primary sources: Worcester Lead Paint Abatement Program ($100,000) and the Neighborhood Stabilization Program ($1.3 million), which included a state match of $340,000 and a city match of $200,000.

The contract was then amended a year later when $200,000 was added in Neighborhood Stabilization funds and $250,000 in city Home Investment Partnership (HOME) funds.

That increased the total public funding under the contract to $2.39 million.

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